News and Analysis
Governor Pushes Additional Taxes on Oil and Gas
Governor Kasich announced his intention to push for new taxes and fees on the oil and gas industry. Specifically, the Governor is advocating for “impact fees” to help cover the costs of maintaining local infrastructure and expanding the state’s severance tax, a tax on entities that consume the state’s natural resources, to encompass natural-gas liquids.
The Governor stated, “At some point, these counties are going to benefit, but in the early years, when it comes to the erosion of roads and infrastructure, we need to make sure that these locals are going to be in a position to manage their infrastructure.”
It is likely that these modifications will be included in the mid-year budget review bill expected sometime in March.
Economists to Senators: Tax Incentives and Right to Work Impact State Competitiveness
In a Senate hearing, two Ohio economists debated the merits state tax incentives. Professor Richard Vedder of Ohio University offered perspectives that tax credits are generally bad policy. Dean Edward “Ned” Hill of Cleveland State University made the case that states need to offer economic development incentives including tax breaks in order to remain competitive. Dr. Hill highlighted the importance of auditing to ensure compliance by incentive recipients.
Both experts agreed that tax policy alone doesn’t drive business investment and they cited right-to-work as a detriment to Ohio’s competitiveness. Read coverage of the hearing by Gongwer News Service.
Get Ready to Comply with New Pension Plan Disclosure Rules
According to Mike Kozlowski, CPA and Director, Assurance & Business Advisory Services, GBQ Partners, the Department of Labor (DOL) has implemented new rules regarding disclosure of expenses for pension plans, including employer-sponsored 401(k) plans. Plan sponsors will be required to make these new disclosures in 2012.
The new rules require the disclosure of service provider fees and other compensation on Schedule C of the Form 5500, which was required to be reported for plan years beginning on or after January 1, 2009. These disclosures include both direct and indirect compensation that was paid by the plan.
Kozlowski explained, “DOL is trying to get more information into all participants’ hands so they can make better informed decisions on their investments. Also, hidden expenses in plans are very tough for a participant to determine so more disclosure is being required. And he advised, “Plan sponsors need to be aware of the rules and communication with your service provider is essential to make sure the disclosures are made timely.” GBQ Partners is an OMA Connections Partner.
Economic Development Incentive Compliance Questioned
Ohio newspapers are reporting widespread non-compliance by companies that received state economic development incentives in recent years. The media is reacting to a new report from Ohio Attorney General Mike DeWine that found fewer than 53 percent of award recipients were in compliance.
The Lima News listed individual companies, and the Columbus Dispatch editorialized in strong support of better monitoring for compliance saying, “… contracts governing awards inconsistently protect taxpayer interests,” and found that the Ohio Department of Development “often does not strictly enforce reward requirements.”
OMA staff will be scrutinizing the attorney general’s report. Member comment is invited.
InvestOhio Tax Credit Launched
Governor Kasich this week signed an executive order authorizing the Ohio Department of Development to immediately adopt rules to implement the “InvestOhio” program. The program provides a non-refundable tax credit to eligible investors who make a qualifying investment in an Ohio small business enterprise.
Registration opens on November 14. Visit the Department of Development to learn more about the program.
Manufacturers Face Unemployment Tax Hikes
Members of the OMA Tax Policy Committee this week heard a presentation by the Ohio Department of Job and Family Services on the state’s unemployment compensation system. With unemployment still around 9% and benefits extended to 99 weeks by the federal government, Ohio’s system has had to borrow $2.6 billion: funds that will need to be repaid.
Significant rates hikes are potentially ahead for many Ohio employers. Take a minute to review Assistant Director Bruce Madson’s PowerPoint to learn how the system is structured and how your company may be impacted.
Further system reforms including possible rate hikes could come in early 2012. Contact Ryan Augsburger at the OMA to help shape the reforms.
Third Frontier Program Changes
Also this week at the meeting of the OMA Tax Policy Committee, Mark Engel of Bricker & Eckler LLP, OMA Tax Counsel, shared a report describing changes that are designed to make the awards more competitive to ensure the best (economic development) projects get approved.
Engle’s report will be useful to manufacturers interested in the variety of programs funded through the Third Frontier.
OMA Tax Committee Materials – 11/03/2011
Businesses Face Higher Unemployment Taxes
In a background paper on unemployment insurance, the Tax Foundation studied states like Ohio that have exhausted their funds for paying unemployment benefits and “may soon face a financial crisis without significant reform to the system.”
Their study, Unemployment Insurance Taxes: Option for Program Design and Insolvent Trust Funds, serves as a primer for an important but complex system and as a roadmap for how to improve it. The study includes state-by-state rankings on unemployment insurance program structure, funding, and other metrics. Ohio’s outstanding federal loans as of September, stood at $2.61 billion.
OMA To Lawmakers: Preserve Tax Reform
OMA Tax Counsel Mark Engel of Bricker & Eckler LLC this week told a panel in the Ohio House of Representatives to hold the line on the broad-base, low-rate commercial activity tax (CAT). Dozens of other business interests have told the lawmakers that their business or industry is harmed by the CAT and are seeking exemption. Pharmaceutical distributors, retailers, grain elevator operators, and gas stations are among the parties protesting the “unfair” burden imposed on them by the CAT.
In his testimony on behalf of the OMA, Engel said, “The solution isn’t a tax system made of Swiss cheese; we tried that already, and it didn’t work. Hold fast to a broad-based, low-rate tax that is simple to enforce and simple to follow, and that treats all taxpayers the same.”
Last week, Cleveland State University Dean Edward “Ned” Hill made a presentation to the committee on the economic benefits of the tax reforms enacted in 2005.